SAN FRANCISCO — The price of bitcoin fell below $20,000 for the first time since December 2020 on Saturday, amid a broader market meltdown driven by rising interest rates, inflation and economic uncertainty spurred by the war in Ukraine.
The plunge — it sank below $19,000 at one point Saturday — took place over several months for bitcoin, the most popular cryptocurrency. Its fall was accelerated in recent weeks by the collapse of two major cryptocurrency projects, Terra-Luna and Celsius, while sowing doubts about the stability of the overall cryptocurrency market. Bitcoin has erased some $900 billion of value since its peak.
From March 2020 to November 2021, the price of a single bitcoin rose twelvefold to $64,000. It passed its previous record of $19,738 in November 2020.
The drastic sell-offs show how intertwined and complex the crypto markets have become in recent years, said R.A. Farrokhnia, a professor at Columbia Business School who specializes in financial technology. As investors flee to less risky assets, “this creates a cascade effect on top of the contagion effect,” he said.
Investing in bitcoin and other cryptocurrencies surged in the pandemic alongside other risky bets on assets like “meme stocks,” collectibles including sneakers and trading cards, and digital art and media known as non-fungible tokens, or NFTs. The speculation was driven by free-flowing stimulus checks, low interest rates on other investments, a social media frenzy, pandemic boredom and a fear of missing out on the next big thing.
The excitement — and potential profits — generated by bitcoin’s rise attracted newcomers to learn about, work on and invest in cryptocurrencies. Some investors saw bitcoin as a safe place to park cash after central banks flooded the economy with money, creating fears of inflation.
Excitement hit a peak in April last year when Coinbase, a cryptocurrency exchange, went public at an $85 billion valuation, a coming-out party for the industry. Bitcoin topped $60,000 for the first time. That swaggering optimism faltered this spring as the stock market plummeted, inflation soared and layoffs hit the tech sector.
The recent sell-off also has led to cutbacks at companies that were in hypergrowth just a few months ago. Coinbase laid off 18% of its employees in June after posting shrinking revenue and losing active users. Other crypto companies, including Gemini, BlockFi and Crypto.com, have also cut jobs.
This article originally appeared in The New York Times .